Why you should invest and trade in Etherium?

by Hitesh Anand ·
Published September 6, 2017
· Updated September 10, 2017

Bitcoin has become the centre of many an online trader’s strategies in recent years. Its volatility as an investment asset and explosive growth as a technical innovation make it incredibly attractive to the day-traders.

With Bitcoin now on the cusp of entering mainstream investment markets, which could stabilise its price and dilute its appeal, traders are now hungrily searching for ‘the next Bitcoin’.

Ethereum v Bitcoin

We’re going to explain to you the similarities and the differences between Bitcoin and Ethereum in more detail in this guide. For now, we’ll summarise by saying they use the same fundamental blockchain technology, where digital data is distributed rather than stored centrally, but Ethereum has the capacity to be applied to a lot more than ‘just’ currency and online payments. It could become the foundation of a whole new internet.

When Bitcoin and blockchain technology first emerged it very quickly had investors clamouring to own chunks of it. Bitcoin was available for just a few cents back then and investors realized that it could become the future of global online payments, making it incredibly valuable in years to come. Ether is the crypto-currency equivalent of Bitcoin. It’s the fuel that powers the Ethereum network. Investors now want to buy up Ether at a low price and sell in several years’ time for a huge profit, just like they did when Bitcoin first hit the headlines.

The early bird catches the worm

Ethereum is still niche. It’s not widely understood. This gives you the opportunity to get ahead of the crowd and perhaps even trade and invest in Ether before the mass market becomes aware of its astonishing capabilities.

Next, we’re going to look at exactly what Ethereum is and explain how it works so you can understand its true potential and identify the commercial developments that might accelerate its value. Acquiring such knowledge could help you know when to 3 buy and when to sell your Ether to make a profit.

Ethereum, like Bitcoin, uses blockchain technology. With blockchain, digital data is distributed, not copied. It doesn’t exist in one central place and isn’t owned by one person, so there’s no single point of failure.

Blockchain could be the foundation for a new type of internet and it’s what Bitcoin, a digital currency, relies on as a new way of paying for things. Ethereum meanwhile uses the same blockchain technology but applies it to a lot more functions. It allows developers, for example, to build apps using the blockchain approach.

The share generation

With Bitcoin, blockchain is used to track ownership of a digital currency – the Bitcoins – but with Ethereum, blockchain runs the programming code of any decentralized application. In simple terms think of it as a bit like having a shared google document, where many members of your shared network can see and edit the document, but on a greater scale and in a much more sophisticated way.

In the Ethereum blockchain, instead of mining for Bitcoin, miners work to earn Ether, a type of crypto token that fuels the network.

Ultimately developers using Ethereum blockchain can create apps and systems in this way that cut out the need for any central intermediary. Imagine, for example, the world where we don’t need the banks to service loans, or estate agents for a property, or insurance brokers, or even government departments.

Smart contracts

The term ‘Smart Contract’ represents a line of code which can be used to exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman. If all sides agree to the terms, the smart contract is valid and is ready to be carried out. Smart Contracts are what separates Ethereum from other cryptocurrencies, they allow the creation of a whole new infrastructure.

With Smart Contracts, you cannot, in theory, have one person corrupt, tamper or destroy the data because they effectively exist across multiple places on the network. Thanks to Smart Contracts, Ethereum can be more secure and there can be zero, or close to zero, downtime.

Next, we look at the key differences between Bitcoin and Ethereum.

We’ve looked at the important similarities between the current giant of the cryptocurrency landscape, Bitcoin, and the young challenger to its throne, Ethereum. Let’s now highlight the key differences.

Understanding these may help you become a better trader or investor of Ethereum.

1. Ether was not created to replace currencies

While Bitcoin was conceived as a form of alternative payment, the Ether currency was initially created to serve the users of the platform, as an Ethereum wallet to use with the apps they develop.

2. Ether’s supply is infinite

While the supply of Bitcoin is finite – it’s scheduled to cease in the year 2140 – Ether strictly speaking has no top limit, with its currency supply driven by its creators and miners.

3. Bitcoin is a lot slower

A Bitcoin transaction takes some 10 minutes to complete but Ether transactions are processed in around 15 seconds, which contributes to its liquidity and volatility.

4. Ownership

While almost all of the Bitcoin in existence was mined by early adopters, Ether’s launch was crowdfunded, meaning most of the currency is owned by people who purchased it. It is predicted that the balance will shift in favour of the Ether miners in about five years.

It’s still very early days for Ether trading so it’s not always that simple and straightforward to get hold of it. Here we show you how best to get started in the world of Ether trading.

There are a number of ways you can try to do so, as we’ve outlined below. But before we get into the mechanics, it’s worth briefly noting there are actually two types of Ethereum – Ethereum (ETH), the ‘original’ version and still most common, maintained by its original developers, and Ethereum Classic (ETC), an alternative blockchain maintained by a new team. Both offer the same technology platforms and seem to be in broad agreement on a future roadmap but their small differences have created two markets.

If you’re looking to buy Ether, first of all, you can download an Ether wallet from the likes of Github, or MyEtherWallet. This may sound like the easiest and most direct way of getting Ether but they are not the most user-friendly of interfaces or processes, so you might prefer going to one of the more established Bitcoin exchanges, most of which now offer Ether as well – somewhere like Coinbase or Kraken.

When the price is right

You can usually use credit or debit card to make payment on the exchange sites or you can buy Bitcoin and use that to pay for your Ether. It’s worth shopping around the different exchanges as the fees for buying and selling can vary quite a lot. Be prepared to upload several documents too, as robust proof of ID and address will be necessary. If you’re technically minded you can also mine for Ether, just like you can Bitcoin.

For a really simple way to trade and invest in Ether, you could use eToro. On eToro you can buy CFDs (Contracts For Difference) which allow you to trade against the price of Ether without having to actually buy and own it as an asset. You open a trading position via a CFD – the contract – and close it to make a profit or cut your losses.

Know your market

Ethereum can be extremely appealing as a long term investment, where you buy now in the hope its value will go up astronomically in several years’ time, just like Bitcoin. Or you can look at short-term day-trading to make quick profits. Ethereum is a very new technology that has got some people very excited and this, in turn, makes the marketplace for Ethereum very volatile, which accentuates the interest for short-term traders. When they see an emerging technology or company innovation that’s based on Ethereum they might buy quickly, knowing its value could increase significantly if that innovation were to really take off and become mainstream.

The complete set of IMF Direction of Trade Statistics and IMF International Financial Statistics are available free via the Economic and Social Data Service, which requires using you university/college username and password (you will have to register first: details are given on the site)

This is a US government site, but it gives international as well as US data.

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The statements, opinions and analyses presented in the articles and newsletters on this website are provided as a general information and education service only. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this website is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Wealthson nor Hitesh Anand shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.